If you are a loan officer or mortgage broker, or just interested in being one, then you may want to open your own mortgage company. You will have more financial freedom and you will be your own boss. Here are the steps to follow when you want to know how to open a mortgage company.

Steps

Part 1

Getting Into the Business

1

Learn about the mortgage industry. If you are not already in the industry, then you will need to understand it more fully before going into business. Take time to read about how mortgages are structured, including things like escrow, interest calculations, and various penalties and fees. Then, look at the players in the industry, from large banks to private mortgage brokers. After that, take a look at the overall state of the industry. There are numerous resources online that can help you get a good picture of the mortgage industry and process.

For example, some bits of helpful information include the fact that mortgage lending is moving slightly away from large banks and more towards non-bank lenders since the last recession.

Effective smaller lenders are targeting snake people and lower-priced mortgages. They also are having success with first-time homebuyers and minorities.[1]

2

Gain industry experience. It may also be a good idea to get experience working at another mortgage company before attempting to run your own. That way you will have on the job training while still making some money. You can also get experience in a related field, such as real estate, a different type of lending institution, or even finance. The experience will provide you with the tools you need to set out on your own.[2]

3

Determine what type of mortgage service you will offer. Though a mortgage company typically refers to a mortgage lender, there are several different types of services that you could offer. The mortgage lender provides the capital to a borrower so that they can purchase a home. They then make money when the borrower repays the loan with interest. You can also go into business as a mortgage broker, who essentially connects borrowers with lenders and helps borrowers find the best mortgage to fit their needs. Finally, the mortgage processor acts as the middleman between the broker or borrower and the lender, making sure that the mortgage paperwork is in line with lender requirements.[3]

Each of these services can become profitable in its own way, but mortgage lending can generally provide the highest returns. That said, it requires a considerable amount more startup capital, as you will need the money to lend to borrowers in the first place so that they can start paying you back.

4

Get individually certified. For each type of business, you will need to be individually certified yourself before you can start a company to offer the service. This will likely be done while you are working and gaining experience. The exact individual licensing requirements vary by state and can be found by searching online for the type of service, your state, and "license."[4]

Part 2

Planning Your Company

1

Choose a name for your mortgage business. You want a name that is easy to remember but is also professional. It is a good idea to use the word "mortgage" in your business name so that clients can easily identify what type of business you do. You can also specify what service your business offers in your name, like calling your business "Greenville Mortgage Brokers" or something similar.[5]

2

Decide on your business organization. You will need to decide what kind of company it will be. Will it be registered as a sole proprietorship where you are the only owner? Or a partnership where there is more than 1 owner who agree to run this company together? If you register the company as a corporation, then it is considered a business entity but it will have the legal rights of a person. Registering as a limited liability company, or LLC, means that it is legally a company but gives the owners limited personal liability.

Forming an LLC may be required when obtaining the proper licensing with your state.[6]

3

Identify a target audience. The mortgage market is saturated with other companies, so you'll never survive unless you target an underserved market. For example, some mortgage companies have had luck serving only very high or very low income borrowers. Alternately, you could tailor your business to a certain group of people that appear underserved in your area.[7]

4

Draft a business plan. You should write a specific plan about how you plan to run your business. You should include all the details including how big of a location you need, how many employees you need to hire, what types of clients you plan to market to, how you plan to market to those customers, and any other details it will take to make this business successful. You should also detail your plans to gain funding to finance your business.

5

Get licensed with your state. Once you have figured out the dynamics of your business, then you will have to register it with the state. You should be able to obtain the necessary paperwork from your state's licensing office and they can help walk you through the registration process. Check with your local Small Business Administration office to see what you need to get licensed in your state and city.

Get a tax ID number. Since this is a business, you will need a federal tax identification number to file your taxes. If you are a sole proprietorship, you can use your Social Security number. If not, you will need an Employer Identification Number, or EIN. You can obtain this number for free from the Internal Revenue Service (IRS).[9]

7

Figure out how much you need to start and run your company. Working with the SBA and your state government should give you an idea of what your start-up costs will be as far as state licensing and insurance. However, you will also need money to rent office space, furnish the space, and, if you are a lender, to make your first loans. You may also need money for advertising if you don't have any initial referrals to work from. Consider your own funding needs carefully, taking into account every possible expense you can think of.[10]

8

Finance your company. How you finance your business will depend on your funding needs and business structure. In any case, you can always take out a bank loan to get started. When choosing this option, make sure you can actually qualify for the loan and that you will have enough capital to make your payments. You can also use your own money or liquidate your assets to finance your company. Additionally, if you are a partnership or LLC, you can take on additional partners to finance your company and help run it with you.

In some cases, you may be able to find a silent partner. This type of partner provides financing to the company but does not have a part in day to day operations, allowing you to make all business decisions.[11]

Part 3

Opening Your Company

1

Lease an office space. To start your business, you will need to find office space. If you are planning on having a fairly small business with not too many loan officers and brokers, then you may not need a really big office. However, you should consider location no matter how big the space. You want your business to be located in an easily accessible location. You should also think about parking for your clients. Are there enough parking spaces and are they easy to get to?[12]

A start-up mortgage company may also find that it can operate out of the owner's home, and simply meet with clients at the home being mortgaged.

2

Furnish your office. In order to do business, you will need a fully-functioning office space. Start by getting a dedicated phone line for the business and setting up utilities like internet and electricity. Get some simple office furniture for your workspace, perhaps from a discount warehouse or some other source of used furniture. Work on finding similarly cheap furniture for your customer waiting areas (if you have them) to save on startup costs. You can always buy better furniture once you become profitable.[13]

3

Market your business. Purchase local advertising space wherever you think you can reach your clients best. Think about your audience. Do you they listen to the radio frequently? Are they likely to drive by a billboard? Think about media in which you can best reach your potential customers and purchase advertising space there. If your new customer levels don't increase within a few weeks, reconsider your advertising choices.

You can also advertise more cheaply by using social media accounts like Facebook and Twitter to promote your brands. Keep your followers updated and post educational content that can be shared.[14]

4

Build up credibility. Your ability to gain clients and close deals will depend on having a reputation for reliable service and trustworthiness. It's unlikely that customers will entrust the large sums involved in their mortgages with someone who has an anything but spotless reputation. For this reason, work on building your reputation, both online and in your community. Encourage referrals and post testimonials about your services online and in your advertisements. Actively work to build a large amount of positive reviews and likes on your social media accounts.[15]

5

Hire employees. If you are going to need more loan officers other than just yourself, you will need to hire some. You can post job wanted ads in the local newspapers or online on job classified sites.